In November, British Columbia implemented a law to restrict short-term rentals in numerous cities within the province, aiming to return thousands of units to the long-term rental market. Starting January 1, the federal government discontinued deductions for short-term rentals in regions where their operation is prohibited. The photograph was taken by Darryl Dyck for The Canadian Press.
In the upcoming year, Canadians can expect a series of tax adjustments, both new measures and alterations to existing ones, set to take effect in 2024. While these changes are anticipated to have a minimal impact on the majority, they might notably affect high-income earners.
One of the prominent modifications is the elimination of some deductions for short-term rentals, effective January 1, as outlined in the Fall Economic Statement. The federal government's decision stems from the observation that in major cities like Montréal, Toronto, and Vancouver, a substantial number of homes were being used for short-term rentals instead of contributing to the long-term housing market. To dissuade such practices, the government is disallowing income tax deductions for short-term rental expenses in areas where local authorities have imposed bans or restrictions.
Additionally, the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) exemptions are being adjusted. The government has decided to remove the GST/HST from "professional services rendered by psychotherapists and counselling therapists" to make mental health care more affordable. This move is estimated to cost $64 million in lost revenue over five years. The intention is to encourage individuals to seek these services by using the income tax system to support socially beneficial initiatives.
Furthermore, the Canada Pension Plan (CPP) will undergo changes, with the introduction of a second level of CPP contributions starting in 2024. This measure aims to fulfil the government's commitment to enhance CPP payments to retirees, resulting in an increase in both employee and employer contributions. The maximum annual CPP payment is set to rise from $3,754.45 in 2023 to $4,045.50 in 2024.
The alternative minimum tax rate is also being adjusted, with proposed changes to the taxable income amount and the rate applied to income above a certain threshold. Originally designed to prevent high-income taxpayers from significantly reducing their tax bills, the revised alternative minimum taxable income amount is slated to increase to $173,000, accompanied by a higher tax rate of 20.5 percent on income exceeding that threshold.
Starting April 1, 2024, the carbon price in provinces under the federal backstop will increase from $65 to $80 per tonne. While the price varies based on fuel type, this adjustment will impact gasoline and propane fuel charges in provinces using the backstop. Notably, 90 percent of government revenues from the carbon tax are returned to households through a rebate program.
Other notable changes include a 4.7 percent increase in federal income tax bracket thresholds, adjustments to the basic personal exemption amounts, and an increase in the annual Tax-Free Savings Account (TFSA) contribution limit to $7,000 in 2024. Additionally, the maximum insurable earnings ceiling for employment insurance rises to $63,200.
A noteworthy change in reporting requirements involves the inclusion of "bare trusts" in tax filings, requiring Canadians to report involvement in such trusts on their T3 returns. Failure to do so could result in fines or penalties. These adjustments aim to streamline reporting and ensure accurate representation of various financial activities.
